In the first quarter of 2006, BASF continued their success story with another top performance. ‘Our declared goal is to create sustainable value by implementing our strategy’, said BASF chairman Dr Jürgen Hambrecht in his presentation of BASF’s first-quarter results at the company’s 54th Annual Meeting on May 4, 2006.
At €12.5 billion, first-quarter sales were 24% higher than in the same period of 2005. Growth was driven above all by considerably higher volumes and price increases in the chemical businesses and in the Oil & Gas segment. Disregarding currency effects, in particular due to the appreciation of the U.S. dollar, sales increased by 20%.
Income from operations (EBIT) before special items rose by 19% compared with the first quarter of 2005 to €1.9 billion. In the Chemicals segment, significantly higher raw materials and energy prices could not be completely passed on to the market in the form of higher sales prices. Earnings in the Plastics segment rose as a result of higher volumes and improved margins in the global polyurethanes business. The Performance Products segment posted higher earnings thanks in particular to strong volume growth and stable margins in the Coatings division. First-quarter earnings in the Agricultural Products division were negatively impacted by the difficult market environment in Brazil and higher research costs. The profitability of the products lysine and vitamin C remained unsatisfactory in the Fine Chemicals division. Higher prices and expansion of the natural gas trading business led to very good earnings in the Oil & Gas segment.
First-quarter EBIT after special items rose by 23% to €1.8 billion. Special items were related to income from the ongoing portfolio optimisation measures in the Agricultural Products division and expenses for restructuring, which are recorded under ‘Other’ until they are implemented in the course of the year.
The financial result declined by €24 million to €21 million. In the first quarter of 2005, the financial result still contained earnings from BASF’s stake in the Basell joint venture, which was sold in the third quarter of 2005. Income before taxes and minority interests rose by 21% to €1.9 billion.
The tax rate was 46% compared with 40% in the first quarter of 2005. This increase was due to the higher contribution to earnings from the Oil & Gas segment. Taxes for oil production that are noncompensable with German corporate income tax amounted to €272 million compared with €198 million in the same period of 2005.
Net income increased 10% to €950 million. Earnings per share were €1.87 compared with €1.60 in the same period of the previous year.
Positive outlook for full-year 2006
Hambrecht’s outlook for full-year 2006 is confident, based on global economic growth of more than 3%. In 2006, BASF expects an average oil price of $60 per barrel of Brent crude and an average euro/dollar exchange rate of $1.25 per euro.
Hambrecht formulated his optimistic prognosis as follows: ‘Our business has developed very positively since the beginning of 2006, and the level of orders remains extremely robust. We have seen two strong years in a row, and we are confident that we will continue our successful performance in 2006. We aim to continue to grow faster than the market. Above all, though, we want to achieve profitable growth. We expect to post higher EBIT before special items compared with the previous year’s strong level. This depends, of course, on a stable geopolitical environment and the development of the crude oil price.’
Growth in Europe, North America and Asia
In Europe, sales by location of company increased by 28% in the first quarter of 2006. EBIT before special items rose by €286 million to €1.4 billion. The higher sales and earnings were primarily due to the contribution of the Oil & Gas segment.
First-quarter sales by location of company in North America rose by 7% in dollar terms. The sales growth was due in particular to the Chemicals and Plastics segments. EBIT before special items increased by €27 million to €298 million.
In Asia Pacific, we increased sales in local currencies by 19%. EBIT before special items rose €28 million to €115 million. Growth in the Chemicals segment was due especially to the Verbund site in Nanjing, China, which started operations in the second quarter of 2005.
Sales by location of company in South America, Africa, Middle East declined by 11% in local currency terms. EBIT before special items was €39 million lower than in the same period of 2005 because of the difficult market environment in the agricultural products business in Brazil. The Coatings division recorded strong business, in particular with decorative paints.
